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CHAPTER 18 Inter Company Gain Transactions Plant Assets Advanced Accounting Guerrero
CHAPTER 18 Inter Company Gain Transactions Plant Assets Advanced Accounting Guerrero
MULTIPLE CHOICE
18-1: a
Accumulated depreciation:
Time of sale P250,000
Current depreciation based on
Original cost (P500,000/10 years 50,000 P300,000
18-2: b
18-3: b
2005 2006
Net income from own operations – Prime P200,000 P250,000
Unrealized gain – Downstream (30,000) __-
Realized net income – Prime P170,000 P250,000
Second Company net income 100,000 150,000
Consolidated net income P270,000 P400,000
18-4: c
18-5: c
Accumulated depreciation:
Time of sale P360,000
Current depreciation (P900,000/10) 90,000 P 450,000
100
18-6: a
18-7: a
18-8: c
18-9: b
18-10: b
101
Minority interest in net assets of subsidiary
Net assets, Jan. 1, 2008 (P1,240,000 / 80%) P1,550,000
Decrease in earnings:
Net loss P40,000
Dividends paid 30,000 ( 70,000)
Net assets, Dec. 31, 2008 P1,480,000
Unrealized loss, Dec. 31 (Upstream) ( 12,000)
Adjusted net assets, Dec. 31, 2008 P1,468,000
18-11: a
102
18-12: a
18-13: d
2007 2008
Net income from operations – Parent P100,000 P120,000
Parent’s share of adjusted net income of Sub:
Net income P 60,000 P 75,000
Unrealized gain – Upstream ( 9,000) -
Realized gain: 2007 (P9,000/3) x ¼ 750
2008 (P9,000/3) - 3,000
Adjusted net income P 51,750 P 78,000
Consolidated net income P151,750 P198,000
MINIS (10,350) (15,600)
Attributable to parent P141,400 P182,400
18-14: d
103
18-15: a
104
PROBLEMS
Problem 18-1
Computation of the missing amounts in the working paper eliminations for P Corporation and S
Company:
(1) P640 (P3,200 x 20%)
(2) P2,560 (P3,200 x 80%)
(3) P1,600 (P800 x 2)
(4) P320 (P1,600 x 20%)
(5) P1,280 (P1,600 x 80%)
(6) P3,200 (P800 x 4)
Problem 18-2
a. Consolidated Net Income
Net income from own operations – P Company P200,000
Unrealized gain on sale of equipment, Dec. 31 – Downstream (30,000)
Adjusted net income – P Co, P170,000
S Company net income 180,000
Consolidated net income P350,000
Problem 18-3
105
Schedule 1:
Selling price – Dec. 28, 2008 P36,000
Book value (P65,000 ÷ 5) x3 26,000
Gain on sale 10,000
Unrealized gain (P25,000 – P15,000) 10,000
Total gain P20,000
Problem 18-4
Problem 18-5
106
c. Minority Interest in Net Assets of Subsidiary
Net assets, Jan. 1, 2006 (P1,240,000 / 80%) P1,550,000
Increase in earnings (loss) -2006 (P40,000 + P30,000) (70,000)
Net assets, Dec. 31, 2006 P1,480,000
Unrealized loss – Upstream (P15,000 – P3,000) 12,000
Adjusted net assets P1,492,000
Minority interest x 20%
MINAS P 298,400
Problem 18-6
Sales P1,500,000
Cost of goods sold 650,000
Gross profit 850,000
Expenses (P200,000 + P100,000 – P8,000 ) 292,000
Consolidated net income P 558,000
Attributable to minority interest (P150,000 x 25%) 37,500
Attributable to parent P 520,500
Problem 18-7
107
(1) To eliminate equity accounts of subsidiary
(2) To intercompany gain on sale of land.
(3) To eliminate intercompany gain on sale of equipment debited to Investment account and restore equipment to
its original book value.
Problem 18-8
108
(5) Gain on sale of equipment 20,000
Building and equipment 5,000
Accumulated depreciation 25,000
To eliminate gain on sale of equipment
109
b. Vincent Company and Subsidiary
Consolidation Working Paper
December 31, 2008
Balance Sheet
Cash and receivables 113,000 35,000 (7) 7,000 141,000
Inventory 260,000 90,000 350,000
Land 80,000 80,000 (4) 10,000 150,000
Buildings and equipment 500,000 150,000 (5) 5,000 655,000
Investment in Jupiter stock 160,000 (2)120,000 -
(3) 40,000
Goodwill (3) 40,000 40,000
Total 1,113,000 355,000 1,336,000
110
c. Consolidated Financial Statements
Assets
Cash and receivables P 141,000
Inventory 350,000
Land 150,000
Buildings and equipment P655,000
Less: Accumulated depreciation 273,000 382,000
Goodwill 40,000
Total assets P1,063,000
Sales P 360,000
Cost of goods sold 200,000
Gross profit 160,000
Expenses: Depreciation P 38,000
Other expenses 20,000 58,000
Consolidated net income 102,000
Attributable to minority interest 6,000
Attributable to parent P 96,000
111
Problem 18-9
(b) P140,000
(e) 0
(h) 0
112
Problem 18-10
Supporting computations
b. Operating Expenses
Operating expenses – Apex P 170,000
Operating expenses – Small 70,000
Amortization (No. 1 above) 10,000
Excess depreciation (P50,000 / 5 years) (10,000)
Consolidated P 240,000
113
c. Consolidated Net Income
Sales (after elimination of intercompany sales) P 840,000
Cost of goods sold (a) (507,000)
Operating expenses (b) (240,000)
Minority interest in net income of subsidiary:
Net income – Small P25,000
Realized gain on sale of building – Upstream 10,000
Adjusted net income P35,000
Minority interest x 40% ( 14,000)
Attributable to parent P 79,000
e. Consolidated Inventory
Inventory – Apex P 233,000
Inventory – Small 229,000
Unrealized profit in inventory – Dec. 31, 2008 ( 12,000)
Consolidated inventory P 450,000
f. Consolidated Building
Buildings – Apex P 308,000
Buildings – Small 202,000
Unrealized gain, Jan. 1, 2006 (50,000)
Realized gain, 2006 – 2008 (P10,000 x 3 ) 30,000
Consolidated buildings P 490,000
g. Consolidated Patents
Patents – Small P 20,000
Allocation 120,000
Amortization, 2002 – 2008 (P10,000 x 7) ( 70,000)
Consolidated patents (net) P 70,000
114
Problem 18-11
115
(P140,000 + 10,000 – P12,000 – P5,000) x 40%
Problem 18 – 12
. December 31 .
. 2008 2007 .
Sales P800,000 P660,000
Cost of goods sold 442,000 368,000 .
Gross profit 358,000 292,000
Operation expenses 178,000 138,000 .
Consolidated net income 180,000 154,000
Minority interest in net income of subsidiary 10,000 10,000 .
Attributable to equity holders of Pluto P170,000 P144,000 .
Supporting computations:
. .
. 2008 2007 .
Consolidated sales:
Combined sales P850,000 P700,000
Less: intercompany sales (50,000) (40,000) .
116
Consolidated sales P800,000 P660,000 .
117
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